MCI reportedly near deal to sell its Internet business Cable and Wireless identified as buyer

Telecommunications

July 14, 1998|By NEW YORK TIMES NEWS SERVICE

MCI Communications Corp. is close to an agreement to sell its Internet business to Cable and Wireless PLC for $1.5 billion to $2 billion in cash, executives close to the negotiations said yesterday.

A deal between the two companies could be announced this week, the executives said, adding that minor negotiating points remained unresolved yesterday. The executives speculated that the only possible development that could scuttle a deal would be the existence of separate, secret talks between MCI and another buyer.

The deal would clear the way for the Justice Department to approve the $37 billion acquisition of MCI by Worldcom Inc.

Though the Federal Communications Commission would also have to sign off on the MCI-Worldcom deal, few people in Washington or on Wall Street expect the commission's review to be onerous for the companies in the way the Justice Department's antitrust analysis has been.

Justice Department officials, along with antitrust regulators from the European Union, have been concerned that a combined MCI and Worldcom could dominate the Internet business. World com's Uunet operation is the biggest Internet service provider, while MCI is also a major Internet carrier. Opponents of the deal have said the combined company could control as much as 70 percent of the market for wholesale access to cyberspace.

MCI has tried to allay those concerns before.

In May, MCI announced that it had sold its wholesale Internet business to Cable and Wireless, an international communications company based in Britain, for $625 million. The unit that MCI initially agreed to sell served smaller Internet companies that in turn sold services to consumers.

At the time, MCI said that deal would be sufficient to answer the antitrust questions of regulators.

"By divesting MCI's Internet backbone, we have eliminated any overlap with Worldcom's Internet business," said Bert C. Roberts Jr., MCI's chairman. "We have formed an agreement that addresses antitrust concerns with the MCI-Worldcom merger."

The regulators did not agree. As GTE Corp. led the lobbying effort against both of MCI's pending deals, U.S. and European anti-trust officials maintained that MCI would have to sell its units that offer cyberspace services directly to businesses and consumers in addition to the wholesale division.

Any new deal between MCI and Cable and Wireless would include those divisions.

The antitrust officials and GTE would have preferred that Worldcom sell Uunet. But Worldcom refused.

The $1.5 billion-to-$2 billion negotiating range would include the $625 million that Cable and Wireless has agreed to pay MCI, executives close to the negotiations said last night.

Like MCI's original deal with Cable and Wireless, any subsequent agreement would also make the sale contingent on MCI's being acquired by Worldcom, the executives said.

MCI, Cable and Wireless and the Justice Department declined to comment yesterday.

People close to MCI and the Justice Department said the department had all but agreed to approve the MCI-Worldcom deal if MCI struck an additional deal with Cable and Wireless that included the units that sell Internet services to consumers and business customers.